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  1. Lenders in Kerala may see deposits flowing to troubled cooperative banks

Lenders in Kerala may see deposits flowing to troubled cooperative banks

Commercial banks in Kerala, sitting pretty on deposits to the tune of Rs 4.7 lakh crore, may soon see exodus of some key depositors to cooperative banks, if the state government's plans materialise.

By: | Thiruvananthapuram | Published: December 3, 2016 6:10 AM

Commercial banks in Kerala, sitting pretty on deposits to the tune of Rs 4.7 lakh crore, may soon see exodus of some key depositors to cooperative banks, if the state government’s plans materialise.

Sources close to the Kerala government told FE that the state has started chalking out plans to deposit the revenue generated by its public utilities, public sector units and the corpus of welfare boards to co-operative banks.

The State Beverages Corporation alone yields Rs 6,564 crore in revenue through sale of liquor.

Currently, State Bank of Travancore and Canara Bank share accounts of several Kerala enterprises. Dhanlaxmi Bank has been conventionally claiming deposits from one of the leading pilgrim centres in the country, Sabarimala Temple. The Sabarimala Temple, which collects about Rs 203-crore revenue per season, has in the current season, provided an e-hundi for gathering pilgrims’ offerings without currency hassles.

State finance minister TM Thomas Isaac and state cooperation minister Kadakampilly Surendran were in New Delhi on Friday, trying to ease the cash disbursement crisis in the co-operative sector.

On November 14, the RBI had stopped primary cooperative banks and district cooperative banks from accepting and exchanging demonetised banknotes. Between November 9 and 14, Rs 280 crore worth of old notes were collected as deposits from account holders, though banks did not give new notes. Primary banks can now neither accept scrapped notes nor issue new ones. They have to manage with a paltry sum of Rs 24,000, provided by district banks every week.

Although the state government has been quick to declare a moratorium on loans from these banks, there is general unease over the potential loss of credibility of the cooperative sector. It is in this context that the government has been thinking of harnessing accounts of its own outfits such as the Beverages Corporation, Devaswom Board, Kerala Water Authority, Kerala State Electricity Board and various welfare boards.

To keep the deposit base intact, the Kerala government is under pressure to act fast. Since most of these public enterprises are in the thick of retail transactions, the state would also be able to address the issue of shortage of lower denomination currency through this move.

The plan to shift the accounts to co-operative banks goes well with the LDF government’s earlier proposal to set up a cooperative bank linking all the district cooperative banks. The Kerala government has even made some initial preparations to create this banking entity. The combined deposits of co-operative banks as on March 2016 were around Rs 59,734.27 crore.

In its first budget, the LDF Government earmarked Rs 10 lakh for setting up a committee to prepare for this move, but the current crisis in the cooperative sector has inadvertently put the project on full throttle.

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